Netflix, Inc. – Euphoria Continues Post-Earnings

Netflix shares soared today after last night’s earnings report, and analysts bolstered Wall Street’s excitement with another round of price target increases. Netflix stock climbed as much as 16.32% to $114.14 per share in early afternoon trades today as most firms have affixed a price target of between $120 and $128 per share.

Not everyone is optimistic, however, as at least one firm has a price target that’s less than 50% of the others.

Pacific Crest moves Netflix target to $122

Following Netflix’s second quarter earnings report, Pacific Crest analysts Andy Hargreaves and Evan Wingren raised their price target from $95 to $122 per share, calling the company a “core holding.” They also stated that the results are “over the top in every way,” pointing to management commentary which indicated that original content drove strong subscriber growth.

They’re predicting that by the first half of next year, Netflix will have completed its global expansion, including China, “with one large launch.” They do note, however, that launching in China depends on whether the streaming video provider can secure licensing and/ or a partner in the market.

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The Pacific Crest team upped their domestic subscriber estimates based on last night’s report from $48.6 million to $50.6 million.

BAML price target for Netflix to $121

In their report, Bank of America Merrill Lynch analyst Nat Schindler and his team sad they increased their price objective for Netflix from $103 to $121 per share. They think the company’s third quarter guidance could be conservative because net adds in both of the last two quarters set new records. Also they said last year’s third quarter was weak and marked the first miss in several quarters.

The BAML team also particularly likes Netflix’s average revenue per user in the long term as it starts expanding its offering of 4K content. They expect to see a mix shift toward the higher price multi-stream accounts and 4K viewing and believe these two factors will increase revenue more quickly than the $1 increase in price they’re expecting in each of the next five years.

Morgan Stanley target to $125

Morgan Stanley analysts Benjamin Swinburne and Thomas Yeh said last night’s results and management’s third quarter guidance demonstrate that demand for Netflix’s service is still growing. They also point out that the international markets which were established before last year are all profitable now, and they like the improvements in long term profit visibility.

Further, they think that as Netflix scales, it’s becoming more and more difficult for others to compete. They raised their base case price target from $107.50 to $125 per share and their bull case from $134.50 to S150 per share.

Some firms still Neutral-rated on Netflix

Analysts Michael Olson and Yung Kim of Piper Jaffray are also less excited about Netflix, as they reiterated their Neutral rating and $96 per share. They like Netflix’s long term opportunity and expect the stock to mostly trend upward. However, they’re Neutral-rated because they expect “periodic pullbacks and would encourage investors to take advantage of more attractive entry points.”

Also Macquarie analysts Tim Nollen and Ankesh Agarwala maintained their Neutral rating and $113 per share price target on Netflix and actually slashed their estimates, contrary to what most of Wall Street is doing. They think investors “might get tripped up” by any future weak quarters “as the reality of negative earnings settles in.” They also don’t like the balance between international subscribers and the high content costs Netflix has.

Other price target changes for Netflix

Netflix also received a plethora of other price target increases after its second quarter earnings report. Stifel Nicolaus analysts upped their target from $104 to $128 per share, while JPMorgan raised their price dramatically from $89 to $127 per share. RBC Capital Markets analyst Mark Mahaney and his team raised their target from $100 to $125 per share.

Cantor Fitzgerald’s price target for Netflix moves from $83 to $125 per share, while Raymond James analysts raised their target from $104 to $120 per share. Pivotal Research analyst Jeffrey Wlodarczak raised his target from $121 to an ultra-bullish $155 per share (and probably the highest) based on subscriber forecasts.

Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at [email protected]

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